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Determinants of High-Tech Company's Stock Volatility
This article discusses the main determinants of stock volatility of high-tech companies. We assume that intensive research and development activities create an informational asymmetry about the future earnings of a company and make its shares more risky. Examining panel data on high-tech companies operating in the markets of Israel, South Korea and Switzerland, we find a positive relationship between the volatility of stock returns and the intensity of investment in research and development. This conclusion suggests that top management of companies must implement an effective communication policy. Such a measure helps to reduce the information asymmetry about investment in research and development and contributes in the future to avoid excessive volatility of stocks.